Assembly Committee Rejects Rate-Regulation Bill
By Steve Lawrence, Associated Press Writer - June 30, 2005SACRAMENTO (AP) _ Siding with insurers, an Assembly committee Wednesday rejected a bill that would regulate workers' compensation insurance rates paid by California employers.
The measure failed to draw any support in the Insurance Committee even though its supporters said many small businesses haven't seen rate cuts despite a series of new laws. Those laws were designed to reduce the cost of treating workers' job-related injuries.
Four lawmakers voted against the bill and six others didn't vote.
The bill's author, Sen. Richard Alarcon, D-Van Nuys, said one small business group found that only about 20 percent to 25 percent of its members had seen any cuts in their workers' compensation insurance bills.
Rate cuts have averaged only 10 percent for those small companies that have received reductions, he added.
Failure to adopt controls would lead to "outlandish profit-taking" by insurers, he contended.
"Now is the time to try to stabilize this market... to strike a balance and in doing so create pricing that's flexible and allows for reasonable profit but also gets the savings to all employers, not just a select few," he said.
Opponents said rates are dropping after skyrocketing in recent years and that Alarcon's bill would discourage insurance companies from entering the California market.
"This is an abject recipe for disaster, and it will do nothing but stop and stunt the reforms," said Michael Mattoch, a lobbyist representing several insurance industry groups.
There have been rate cuts of 15 percent to 41 percent and more are on the way, he argued.
The bill would create a three-member commission composed of the governor, the attorney general and the insurance commissioner or their representatives.
The commission would set a range of acceptable rates. Insurers that wanted to charge more or less than the limits would have to get prior approval from the commission.
Supporters said the bill would bring stability to rates that have fluctuated wildly since insurers convinced the Legislature to eliminate minimum rate levels in the mid-1990s.
"The experience over the last 10 years without regulation is just atrocious," said Mark Gerlach, a consultant for the California Applicants' Attorneys Association, a group of lawyers who represent injured workers.
Angie Wei, a lobbyist for the California Labor Federation, said workers' compensation insurers were paying out $1.40 in benefits for every $1 they received in premiums in 1999. Last year, she said, the payout had dropped to 41 cents for every dollar in premiums paid.
"Where's the remaining 59 cents going?" she asked. "It's not coming to injured workers. ... I have a sense that at least some of it is going to profits and CEO pay."
Another bill opponent, California Chamber of Commerce lobbyist Charles Bacchi, acknowledged that "not everyone has experienced huge rate reductions" but he said that some small businesses were beginning to see rate cuts.
"The bill could be a two-edged sword," he added. "For employers, the last thing we want to see is to have a floor on prices.''
Several committee members said Alarcon should wait until next year to try to move the bill.
"Small businesses in my district have not seen reductions, either," said Assemblyman Dennis Mountjoy, R-Monrovia. "How do we solve the problem? I don't know if this is the way. Let's give it a chance to solve itself. If it doesn't, let's revisit it."
Mountjoy and Assemblymen John Benoit, R-Palm Desert, Ron Calderon, D-Montebello, and Tom Harman, R-Huntington Beach, voted against the bill.
Assembly members Juan Vargas, D-San Diego, Dario Frommer, D-Los Angeles, Betty Karnette, D-Long Beach, Sally Lieber, D-Santa Clara, Pedro Nava, D-Santa Barbara, and Tom Umberg, D-Santa Ana, didn't vote.
Alarcon has been trying for three years to regulate workers' comp insurance rates. This was the first year he was able to get the measure out of the Senate, which approved it May 31 on a 23-14 vote. | 
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